Serbia plans to borrow billions from the United Arab Emirates as the country’s deputy prime minister warned that it could face bankruptcy without urgent steps to cut public sector wages.

The comments from Aleksandar Vucic – the deputy premier widely seen as the most powerful man in Serbia’s coalition, formed in July last year – came before the government was due to unveil deep austerity measures on Tuesday. Mr Vucic said Serbia expected to receive a low-interest $1bn UAE loan on “favourable terms” this year, with further loans taking the total to $2bn-$3bn by the end of 2014.